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Profitable Meters
Against the background of the crises in the sphere of house building, the situation in the segment of commercial immovable is very interesting. The multiplicative effect of slowing down the rates of economic growth, which may be reflected on the development of trade centers of Kazakhstan, is not yet clear.
In the country with almost 15.5 million population, the highest activity of retail is concentrated in two cities – Almaty and Astana. In other words, the geographical disproportion in the distribution of trading centers is observed there. As to Jones Lang LaSalle, nowadays the total area of existing trade centers in Almaty and Astana makes up nearly 250,000 square meters. And only three trading centers, the total area of which makes up 79,000 square meters, more or less correspond to the international standards; there are only some shortcomings in them.
In Almaty, on the average, 1,000 people, accounts for nearly 41 sq. meters of modern shelf space. For example, in Warsaw this index makes up 550 sq. meters for 1,000 inhabitants, in Krakow – nearly 337 sq. meters, in Moscow – nearly 150 sq. meters.
As of today, trading centers are conventionally subdivided into three types. In the Republic of Kazakhstan the majority of big shops belong to the first generation of trading centers. As a rule, they are located in the center of the city and do not have enough space, well thought off conception of development, and strong tenant pool. Besides, the trading centers of the first generation do not distinguish with effective planning and good design. Ten years ago developers did not possess the experience of competent planning, and on the market there was a lack of retail operations staff (the companies which offer commodities and services), which are ready to invest into the high-class decorating.
Although everything passes away, everything changes. Within the last two years new trading centers of the second generation appeared in Kazakhstan. Among those are such ones as, for example, “Mega-Centers” in Almaty, Astana and Shymkent, or “Sary-Arka” in Astana. Their distinguishing feature is more or less good management, the strategy of hiring tenants and the entertaining character of the conception, as well as the transporting scheme and roomy parking lot, well worked over, but saying the truth, not everywhere.
During 2008-2011 big local developers are planning to open in Almaty 7 more trading centers of the second generation with the total area of shelf space equaling nearly 278,000 sq. meters. As for Jones Lang LaSalle’s estimations, until 2011, there will be produced nearly 460,000 sq. meters of the overall hiring out trade centers’ space, of which the most part of the volume will account for the second generation of shelf space. It will happen if, for example, the plans for building the objects will not change in connection with the situation which takes place now in the real estate market.
Nevertheless, sooner or later, the coming of the new retailers and the growing purchasing power of the population will bring to the appearance of the trading centers of the third generation in Kazakhstan. These projects are characterize by high-class constructions, professionally trained conception, large number of brands, being represented in trading centers, little share of grocery operations staff and stylish clothes’ staff, and at the same time with much share of operators, who render services and accessory.
It is possible that already after 2009 trade centers of third generation will appear on the domestic market, the total area of those centers will make up 50,000 – 100,000 sq. m. and more. An increase of the population’s income, along with putting on the market high-class trading areas will stimulate the coming of foreign retailers. Foreign operators, ready to act independently, without the agreement of franchise with local retailers, already appear.
Prices for the leasing of trading accommodations depend on location, size of the leased area and retail commodity turnover. Certainly the highest lease rates are in the central regions of cities, where the most business activity is concentrated. For example, the cost of lease of the store, located on one of the central streets in Moscow, is close to the prices in London – up to 5,000 Euros for one square meter per year. One square meter of the lease of the store in the center of Paris costs nearly 6,000 Euros.
In Almaty the average cost of area lease in the trading gallery, for example, in Mega-Center, equals approximately $880 USD for 1 square meter per year. In other trading centers, such as Promenade, lease rates comprise on the average about $700 USD for one square meter per year.
In Astana the prices of the lease of contemporary trading accommodations are, on the average, $200 USD lower than in Almaty. As far as regions are concerned, an increase of the income level of population and an increase of consumer demand will contribute to the development of the market of modern trading areas in the regions, and correspondingly to the increase of the lease rates from the minimum till the average index.
In whole, with the appearance of new trading centers on the market, the lease rates will stabilize. The old trading centers, which will not be reconstructed, will encounter the forced fall in prices for lease. At the same time the price of the areas lease in modern commercial centers of high quality will increase. The appearance of international and domestic retailers who are able to compete for the advantageous arrangement of trading areas will contribute to an increase of rates.
The market of commercial premises can become saturated already after the building of trading centers of the second generation. Everything will depend on the economic situation in the country.
First international developer, which appeared on Kazakhstan market, was the Turkish company, which opened Ramstor together with local developer «Butya» in Almaty in 1999. In the next few years, the company has opened a network of Ramstor Stores in the other regions of Kazakhstan. Now the local developers who are the main players of trading areas’ market, occupy the major part of this segment. These are such companies as Interfood, Silk Way Construction, TS Engineering, Astana Group, Capital partners. With respect to foreign retailers are concerned, they mostly enter the market through franchise.
As a rule, first the markets of central cities are developed, and thereafter business is widened on to the regions. For example the famous retail network of garments stores «Esprit», first entered the Moscow market through franchise, and then, in parallel with the development in the regions of Russia, opened its store in one of trading centers in Almaty.
Together with this, the tendency of an increase of foreign operators, who open their representations in Kazakhstan cities without the mediators, is observed in recent time. For example German company «Adidas» has opened its store without franchise. Swedish company «IKEA», which usually plays the role of the developer without any mediators, has its certain plans as well. To put it more precisely IKEA already comes to Kazakhstan market. On the CIS territory IKEA is for the present represented only in Russia, where it came in 2000. At the beginning this company opened trading centers in Moscow and in other big cities of Russian Federation, and then it began to develop its network in the cities with the population less than million people. It is known that in the nearest future IKEA opens its store in Kiev also.
According to Jones Lang LaSalle forecasts the quantity of new international retailers which appear on Kazakhstan market, will actively multiply during the next few years. To the big extent it is connected with the fact that the consumer market of Kazakhstan, until now is one of the attractive on CIS territory. Now more than 500 international brands are represented in the Republic, in the first place these are the companies-producers of high-quality production. In spite of it more than the third part of retailers in the territory of Kazakhstan are not official representatives of any company- producer.
One cannot but also mention the rapidly developing local companies, represented on this market. The overwhelming majority of them present the production made in other countries. Those very retailers are such companies as Gros, Silkway, Interfood (supermarkets), Sulpak, Tekhnodom (household appliances); Star Cinema, Babylon (entertainment); The Planet of Beauty, MonAmie, Beautymania (cosmetics and perfumery) and others.
The potential of Kazakhstan market of retail trade is enormous, since an increase of population’s income stimulates consumer demand. According to official data, about 80% of consumer expenditures in the Republic of Kazakhstan relate to provisions and nonfoods. About 40% of them are distributed to provisions, and the rest 60% - to nonfoods sector.
The tendency of an increase in level of wages, the main fuel for the consumer boom is observed in the last seven years. This will influence increase in the retail trade on the average of 12% a year beginning from 2008 till 2011.
Retail boom and the restraining of tenge with respect to dollar will lead to an increase in the demand for western goods almost in all sectors, except food. The increased incomes allowed people to spend money not only for provisions and everyday goods, but also for entertainments and quality clothing of leading world producers. Consequently competent price policy and positioning of brands will be the major key for successful development of franchise in garments industry. For the last several years spontaneous trade of low quality garmentsd loses its portion on the market, giving the way to qualitative brand marks.
The entry of Kazakhstan into WTO will play an important role in development of trading centers’ market. It will contribute to the appearance of new quality goods and services, expansion of the presence of foreign retailers, introduction of the international standards of quality. In connection with the discovery of the outer boundaries of market the consumer will be able to get access to the wide assortment of commodities at the lower price.
In the country with almost 15.5 million population, the highest activity of retail is concentrated in two cities – Almaty and Astana. In other words, the geographical disproportion in the distribution of trading centers is observed there. As to Jones Lang LaSalle, nowadays the total area of existing trade centers in Almaty and Astana makes up nearly 250,000 square meters. And only three trading centers, the total area of which makes up 79,000 square meters, more or less correspond to the international standards; there are only some shortcomings in them.
In Almaty, on the average, 1,000 people, accounts for nearly 41 sq. meters of modern shelf space. For example, in Warsaw this index makes up 550 sq. meters for 1,000 inhabitants, in Krakow – nearly 337 sq. meters, in Moscow – nearly 150 sq. meters.
As of today, trading centers are conventionally subdivided into three types. In the Republic of Kazakhstan the majority of big shops belong to the first generation of trading centers. As a rule, they are located in the center of the city and do not have enough space, well thought off conception of development, and strong tenant pool. Besides, the trading centers of the first generation do not distinguish with effective planning and good design. Ten years ago developers did not possess the experience of competent planning, and on the market there was a lack of retail operations staff (the companies which offer commodities and services), which are ready to invest into the high-class decorating.
Although everything passes away, everything changes. Within the last two years new trading centers of the second generation appeared in Kazakhstan. Among those are such ones as, for example, “Mega-Centers” in Almaty, Astana and Shymkent, or “Sary-Arka” in Astana. Their distinguishing feature is more or less good management, the strategy of hiring tenants and the entertaining character of the conception, as well as the transporting scheme and roomy parking lot, well worked over, but saying the truth, not everywhere.
During 2008-2011 big local developers are planning to open in Almaty 7 more trading centers of the second generation with the total area of shelf space equaling nearly 278,000 sq. meters. As for Jones Lang LaSalle’s estimations, until 2011, there will be produced nearly 460,000 sq. meters of the overall hiring out trade centers’ space, of which the most part of the volume will account for the second generation of shelf space. It will happen if, for example, the plans for building the objects will not change in connection with the situation which takes place now in the real estate market.
Nevertheless, sooner or later, the coming of the new retailers and the growing purchasing power of the population will bring to the appearance of the trading centers of the third generation in Kazakhstan. These projects are characterize by high-class constructions, professionally trained conception, large number of brands, being represented in trading centers, little share of grocery operations staff and stylish clothes’ staff, and at the same time with much share of operators, who render services and accessory.
It is possible that already after 2009 trade centers of third generation will appear on the domestic market, the total area of those centers will make up 50,000 – 100,000 sq. m. and more. An increase of the population’s income, along with putting on the market high-class trading areas will stimulate the coming of foreign retailers. Foreign operators, ready to act independently, without the agreement of franchise with local retailers, already appear.
Prices for the leasing of trading accommodations depend on location, size of the leased area and retail commodity turnover. Certainly the highest lease rates are in the central regions of cities, where the most business activity is concentrated. For example, the cost of lease of the store, located on one of the central streets in Moscow, is close to the prices in London – up to 5,000 Euros for one square meter per year. One square meter of the lease of the store in the center of Paris costs nearly 6,000 Euros.
In Almaty the average cost of area lease in the trading gallery, for example, in Mega-Center, equals approximately $880 USD for 1 square meter per year. In other trading centers, such as Promenade, lease rates comprise on the average about $700 USD for one square meter per year.
In Astana the prices of the lease of contemporary trading accommodations are, on the average, $200 USD lower than in Almaty. As far as regions are concerned, an increase of the income level of population and an increase of consumer demand will contribute to the development of the market of modern trading areas in the regions, and correspondingly to the increase of the lease rates from the minimum till the average index.
In whole, with the appearance of new trading centers on the market, the lease rates will stabilize. The old trading centers, which will not be reconstructed, will encounter the forced fall in prices for lease. At the same time the price of the areas lease in modern commercial centers of high quality will increase.
The market of commercial premises can become saturated already after the building of trading centers of the second generation. Everything will depend on the economic situation in the country.
First international developer, which appeared on Kazakhstan market, was the Turkish company, which opened Ramstor together with local developer «Butya» in Almaty in 1999. In the next few years, the company has opened a network of Ramstor Stores in the other regions of Kazakhstan. Now the local developers who are the main players of trading areas’ market, occupy the major part of this segment. These are such companies as Interfood, Silk Way Construction, TS Engineering, Astana Group, Capital partners. With respect to foreign retailers are concerned, they mostly enter the market through franchise.
As a rule, first the markets of central cities are developed, and thereafter business is widened on to the regions. For example the famous retail network of garments stores «Esprit», first entered the Moscow market through franchise, and then, in parallel with the development in the regions of Russia, opened its store in one of trading centers in Almaty.
Together with this, the tendency of an increase of foreign operators, who open their representations in Kazakhstan cities without the mediators, is observed in recent time. For example German company «Adidas» has opened its store without franchise. Swedish company «IKEA», which usually plays the role of the developer without any mediators, has its certain plans as well. To put it more precisely IKEA already comes to Kazakhstan market. On the CIS territory IKEA is for the present represented only in Russia, where it came in 2000. At the beginning this company opened trading centers in Moscow and in other big cities of Russian Federation, and then it began to develop its network in the cities with the population less than million people. It is known that in the nearest future IKEA opens its store in Kiev also.
According to Jones Lang LaSalle forecasts the quantity of new international retailers which appear on Kazakhstan market, will actively multiply during the next few years. To the big extent it is connected with the fact that the consumer market of Kazakhstan, until now is one of the attractive on CIS territory. Now more than 500 international brands are represented in the Republic, in the first place these are the companies-producers of high-quality production. In spite of it more than the third part of retailers in the territory of Kazakhstan are not official representatives of any company- producer.
One cannot but also mention the rapidly developing local companies, represented on this market. The overwhelming majority of them present the production made in other countries. Those very retailers are such companies as Gros, Silkway, Interfood (supermarkets), Sulpak, Tekhnodom (household appliances); Star Cinema, Babylon (entertainment); The Planet of Beauty, MonAmie, Beautymania (cosmetics and perfumery) and others.
The potential of Kazakhstan market of retail trade is enormous, since an increase of population’s income stimulates consumer demand. According to official data, about 80% of consumer expenditures in the Republic of Kazakhstan relate to provisions and nonfoods. About 40% of them are distributed to provisions, and the rest 60% - to nonfoods sector.
The tendency of an increase in level of wages, the main fuel for the consumer boom is observed in the last seven years. This will influence increase in the retail trade on the average of 12% a year beginning from 2008 till 2011.
Retail boom and the restraining of tenge with respect to dollar will lead to an increase in the demand for western goods almost in all sectors, except food. The increased incomes allowed people to spend money not only for provisions and everyday goods, but also for entertainments and quality clothing of leading world producers. Consequently competent price policy and positioning of brands will be the major key for successful development of franchise in garments industry. For the last several years spontaneous trade of low quality garmentsd loses its portion on the market, giving the way to qualitative brand marks.
The entry of Kazakhstan into WTO will play an important role in development of trading centers’ market. It will contribute to the appearance of new quality goods and services, expansion of the presence of foreign retailers, introduction of the international standards of quality. In connection with the discovery of the outer boundaries of market the consumer will be able to get access to the wide assortment of commodities at the lower price.
